A meeting of the Trustees Finance and Audit Committee was held at the Boston Public Library, Trustees Room, Johnson Building, 700 Boylston Street, Boston, MA 02116 on Thursday, April 19, 2012 at 8:00 a.m.

Present at the meeting were: Chairman Evelyn Arana-Ortiz; Trustees: Zamawa Arenas, Donna M. DePrisco, and Byron Rushing; Boston Public Library staff: President Amy E. Ryan, Chief Financial Officer Sean Nelson, Budget and Procurement Manager Edward Maheigan, Supervisor of Accounting Sean Monahan, Director of Administration and Technology David Leonard, and Clerk of the Board Nancy Grilk; City of Boston staff: Krista DeNofrio, Budget Office, and Caroline Driscoll, Law Department; Michael Black of New England Pension Consultants; and from the public: Citywide Friends David Vieira, representatives from SEIU Local 615 and AFSCME Local 1526, and Boston City Councilor At Large Felix Arroyo.

The Chair reviewed the agenda and re- ordered items to accommodate members of the public who wish to testify on the FY13-FY15 Guard and Patrol Services contract and have not yet arrived.

The Chair addressed the first item of business, pertaining to the Minutes of the Trustees Finance and Audit Committee Meeting held on Wednesday, March 7, 2012. On a motion made and duly seconded, the Minutes of the Trustees Finance and Audit Committee meeting held on March 7, 2012 were approved and subsequently posted on the Boston Public Library’s web site.

The Chair called on CFO Sean Nelson to begin the Review of Contracts for the Trustees Annual Meeting. Mr. Nelson referred to the draft Proposed Award of Contracts spread sheet listing the nine contracts under consideration, holding the FY13-FY15 Guard and Patrol contract for later discussion.

The FY 13-14 Vehicle Leasing contract includes two hybrid sedans, two panel trucks, two passenger vans, one pick-up truck with a lift gate, and a Zipcar membership. CFO Nelson noted additional of one truck from the previous contract. The leased vehicle costs include insurance, full maintenance, and a substitute vehicle. The Zipcar membership program began two years ago as a cost saving measure which eliminated the need for two leased vehicles.
The FY13 Critical Repair Fund allows the BPL to contract for immediate repairs to address emergency maintenance issues that arise during the fiscal year, and is funded with City of Boston capital funds.

The FY13 Procurement of Library Books is a Chapter 30b sole source procurement contract giving the BPL the ability to enter into contracts with a variety of library vendors without having to bid each purchase. CFO Nelson referred to the Book Contract Vendor List containing more than one hundred vendors. There is a maximum of $100,000 for each, with an exception for very large vendors who are exempt. The cumulative amount of contracts cannot exceed the total contract amount of $2,474,915.

The next five proposed contracts are related to e-rate and Mr. Nelson turned to Mr. David Leonard, Chief of Administration and Technology for an overview. Mr. Leonard reported that the contracts are a continuation of existing contracted services with the BPL. Responding to increased patron demand throughout the system, wired and wireless internet capacity is increased. Services are shared services across the Metro Boston Library Network (MBLN) with the exception of cellular and cellular data services. Increased demand was determined by a combination of the pattern of usage of the past several years, an increase in the BPL laptop lending program to patrons, and the logistical offerings from vendors for service. The majority of funding is derived from the federal Universal Services Administration Company e-rate applications process. The Chair asked for clarification of the Network Maintenance contract. Mr. Leonard reported that it is a one fiscal year contract, with $259,288.62 the BPL contract amount and $522,637.62 covered by the expected e-rate contribution.

The Chair moved the agenda to address the proposed FY13-FY15 Guard and Patrol Services contract. CFO Nelson reported that an invitation for bids for a three year contract to provide specific services was solicited in late January 2012 with a submission deadline of mid-February. Six bids meeting minimum criteria were submitted. Bids ranged from a high of $2.4 million to a low of just under $2.1 million for a three year contract. Andy Frain Services submitted the lowest bid at $2,062,123. Based on the invitation for bids and the provisions of the Uniform Procurement Act of Massachusetts General Law Chapter 30b, the contract must be awarded to the low bidder. The Chair noted that the Committee members received letters from two labor unions regarding the proposed contract, and opened the floor to public comment. Mr. Bollard, an organizer and researcher at SEIU Local 615, indicated that Andy Frain Services’ pay and benefits are lower than those of unionized security officers, and asked the Committee to base their decision on the bidder that offers the highest pay and benefit package to employees. Ms. Alston, a security officer and SEIU Local 615 member spoke of her and other’s efforts in securing an improved pay and benefit package with her employer, which has improved working conditions in the security industry. She expressed her support for a BPL security officers’ contract that includes health care. Ms. Elissa Cadillic, President of AFSCME Local 1526 representing clerical and facilities staff at the BPL urged award of a contract that will pay a living wage, provide quality and affordable health benefits to employees, sick days, and a grievance procedure.

Discussion followed. CFO Nelson advised that the contract was a straight lowest bid procurement with no union workforce requirement. He added that bidders in the current bid process are required to follow the City of Boston Jobs and Living Wage Ordinance. City of Boston Assistant Corporation Counsel Caroline Driscoll reported that the bidding process has been appropriately followed, with an obligation to accept the lowest bid. Discussion continued concerning the addition of benefits packing which would require a re-bidding process for this contract. The Chair proposed that the Committee take no action on the proposed FY13-FY15 Guard and Patrol contract, and further discussion take place at the full Board of Trustees meeting on May 8, 2012.

The CFO advised that it is possible to stop the existing process and re-bid the contract with a new set of requirements, noting that the existing guard and patrol contract expires on June 30, 2012. Re-starting the bid process may necessitate the BPL enter into a short term, contract. A full discussion on what should be included in a re-bid contract will take place at the May 8, 2012 Trustees meeting.

The Chair provided the opportunity for City Councilor Felix Arroyo to speak on the Guard and Patrol Services contract process. The Councilor urged the Committee to re-bid the contract and consider accepting a contract with an increased employee benefits package, and unionized workers.

The Chair recommended that the Committee not vote on the FY13-FY15 Guard and Patrol contract, and recommend that, with additional information from the City’s Law Department, the issue be discussed at the Trustees May 8, 2012 Board meeting.

On a motion made and duly seconded, the Committee:

VOTED: that, the Trustees Finance and Audit Committee recommends that the Trustees of the Public Library of the City of Boston approve the Award of Contracts at the Trustees Meeting on May 8, 2012 minus the FY13-FY15 Guard and Patrol Services Contract.

The Chair called for a change in the agenda order to address the Events Pricing Proposal and called on Mr. David Leonard. Mr. Leonard addressed a specific proposal to amend the room rental pricing for the Popular Reading Room at the Central Library in Copley Square. The recommendation is to reduce the daytime rental fee to $2,500 from the current rate of $4,200 for a minimum of four hours. The room is rarely rented at the currently available rate. A reduced daytime price is expected to increase utilization and thus provide increased revenue to the BPL. Discussion followed. Mr. Leonard advised that, if the lower rate is approved, the BPL and partner, The Catered Affair would create a marketing plan to promote use of the room. Hours for the lowered rate would be between 8:00 a.m. to 4:00 p.m., and the existing nonprofit rate would apply.

On a motion made and duly seconded, the Committee:

VOTED: that, the Trustees Finance and Audit Committee recommends that the Trustees of the Public Library of the City of Boston approve the Events Pricing Proposal to reduce the daytime rate for rental of the Popular Reading Room to $2,500 between the hours of 8:00 a.m. and 4:00 p.m. for a minimum of four hours.

The Chair called on Mr. Michael Black of New England Pension Consultants (NEPC) to report on the BPL Investment Policy Statement, amended by the Trustees at the March 13, 2012 meeting. Mr. Black distributed an Investment Performance “Flash” Report to provide background on the performance of the equity market through March 30, 2012 and a Proposed Rebalancing report to help guide the Committee with the transition to the new target allocation, reducing dependence on equities and increasing diversification of the portfolio. Mr. Black reported on NEPC’s fund manager search, and recommends Pacific Investment Management Company, known as PIMCO All Asset Fund as the most favorable largely due to their fixed income bias over other managers’ equity bias. PIMCO had a lower risk and higher return over a five year period, net of all fees than the other managers considered. Mr. Black characterized PIMCO as a broadly diversified, fixed income focused manager, very tactical with the ability to instantly shift capital. He noted that the City of Boston invests through PIMCO. NEPC’s rebalancing recommendation based on the new target weights, is to take approximately $5 million from equities and allocate to a Global Asset Allocation Manager. The Chair reiterated that the Committee is empowered to make the asset allocation decisions in rebalancing the BPL’s portfolio based on the target weights approved by the Board of Trustees.

The Committee welcomed Mr. Rob Morena, Vice President of PIMCO’s New York office. Mr. Morena discussed the benefits of a global tactical asset allocation strategy, with one U.S. mutual fund with daily liquidity that provides asset allocation to a wide range of funds. Through a structured partnership, PIMCO manages the underlying funds. Mr. Rob Arnott of Research Affiliates, an independent allocation consultant, advises PIMCO on asset allocation funds using quantitative analysis. Mr. Morena presented the recommended BPL investment target of the Consumer Price Index plus 5%, an aggressive target which PIMCO has achieved in the past through modest volatility, following Mr. Arnott’s quantitative model. Mr. Morena reviewed the variety of strategies used in the construct of the fund to maintain its diversity, as well as the real return of each class within the fund along with the performance of each of the fund managers, cyclical factors, timing of economic conditions, and political considerations. These combined conditions inform the decision making process around when to move in to or out of asset classes. Mr. Morena reviewed the performance of the all asset class funds since their inception which at 8.87% has well outpaced inflation plus 5%. Discussion followed. Mr. Black reported that Mr. Morena would be available to provide updates on the BPL’s investments to the Committee at future meetings. The Committee agreed that Mr. Morena provided a solid presentation backed up with concrete numbers. On a motion made, amended and duly seconded, it was:

VOTED: that, the Trustees Finance and Audit Committee approves PIMCO as an investment manager for a portion of the Boston Public Library’s portfolio, and that the Trustees Finance and Audit Committee retain a focus on Socially Responsible Investments.

Mr. Black advised that the BPL’s investment can be shifted to PIMCO through the custodian and through an omnibus account at any time; he added that it would likely take some time to redeem from the existing accounts. He will work with CFO Nelson.

The Committee returned to the discussion on the FY13-FY15 Guard and Patrol contract. President Ryan proposed to the Committee that to avoid delay, the contract be re-bid without sending it to the Board of Trustees. President Ryan would check with the pertinent City of Boston departments on the appropriateness and language for the contract re-bid. The Committee members expressed their opinion that there has been sufficient Committee discussion on the contract and criteria and instructed the President and CFO to re-bid the contract and include specific criteria related to employee benefits. At the May 8, 2012 meeting, the Committee will request delegation of authority from the Board of Trustees to approve the award of the re-bid FY13-FY15 Guard and Patrol contract.

The Chair addressed the next agenda item of Review of Request for Proposals for Annual Independent Audit Services. CFO Nelson reviewed the RFP process for the Committee which included an Evaluation Team of Chair Arana-Ortiz, CFO Nelson, Budget and Procurement Manager Edward Maheigan, Supervisor of Accounting Sean Monahan and Deputy City Auditor Dennis Coughlin. The team established criteria, scored the three respondents, and ranked them. The lowest bidder was ruled out. The Evaluation Team’s recommendation to the Committee is Sullivan, Rogers & Company, LLC.

Mr. Daniel M. Sullivan, Mr. Christian J. Rogers, and Mr. Matthew Hunt, partners and shareholders of Sullivan and Rogers provided an introduction to their services. They stressed the foundation of a team service approach, accessibility, commitment to leadership in the governmental industry, and meeting deadlines as their strengths. Their mission is to provide personalized service that adds long-lasting value to their clients while adhering to stringent standards. Discussion followed. The Chair noted that the Management Letter is an important instrument for the Committee and BPL and asked Mr. Sullivan about their approach. Mr. Sullivan agreed on the importance of the Management Letter, recognizing it as an important tool in internal control. Each of the three principles in attendance will be key team members: Mr. Rogers as the project leader, Mr. Hunt as the senior leader, and Mr. Sullivan the technical reviewer.

Next presenter is Mr. David Diiulis of O’Connor & Drew, Inc. the second respondent to the RPF. Mr. Diiulis expressed his appreciation of the working relationship his company has had as the independent audit service with the BPL for several years. Mr. Diiulis added that his company has met each deadline, and last year, provided a new team. He stressed that governmental and nonprofit entities are specialties for his company. Discussion followed. Mr. Diiulis spoke of O’Connor & Drew’s hiring and continuing education philosophies, and highlighted some of the past accomplishments as the BPL’s independent auditor.

Final scoring will be completed by the Evaluation Committee followed by opening the price proposals. Mr. Monahan expressed his support for the work of O’Connor & Drew, noting that they have met every deadline and been accessible and responsive, and noted that he believes each of the two companies will provide good service. Committee members reported that they did not find fault with O’Connor & Drew’s work but felt the BPL would benefit from a fresh perspective from a new company.